International investors in Qatar most commonly incorporate companies with limited liability. Sometimes they favour a private shareholding firm, depending on legal, regulatory and commercial factors.

This section looks at what happens later on when a business is dissolved. It assumes that all shareholders of the company have agreed to the dissolution, and that dissolution is not being pursued in the context of the insolvency of the firm or one of its shareholders.

Liquidation

Liquidation is the process by which a company’s assets are ascertained and investigated, with proceeds due to creditors being paid in the first instance, after which the assets and proceeds that remain can be distributed to the shareholders.

The reason for liquidation need not be completion of a project, but may instead be that the shareholders of a company are seeking to restructure their business arrangements, which may have been organised in a particular way for commercial reasons that are no longer applicable, to reduce costs and liabilities.

A company must ensure that wherever its name is used, the words “under liquidation” are included. The procedure by which a firm may be liquidated needs to be considered in the context of both the procedure set out under law and the articles of association of the company.

The directors of a business remain responsible for its management until the appointment of a liquidator. The company is generally bound by the decisions of the liquidator, provided the liquidator acts within the limits of authority conferred on him.

The liquidator is required to file the company’s tax return with the Ministry of Finance, covering the period from the end of the previous accounting period to the date of completion of the liquidation. The tax return must be filed within four months from the end of this period. Until the liquidator obtains a tax clearance letter from the Ministry of Finance, he or she cannot make the final application to the Ministry of Economy and Commerce to remove the company from the Commercial Register.

The steps to dissolving a business in Qatar

Step 1: Identify the condition for dissolution There are various conditions set out in Commercial Companies Law 5, published in 2002, the satisfaction of any one of which will mean that the firm may be dissolved. These include:

• Expiry (without renewal) of the current term of the company
• Satisfaction or the impossibility of satisfaction of the objectives for which the business was incorporated
• Transfers of all the shares in the company, such that it no longer has the minimum number of shareholders required by law
• Insufficient capital to achieve the company’s objectives
• In the case of a limited liability company or a private shareholding company, the firm’s losses equate to half the value of its share capital
• Unanimous agreement by the shareholders in an extraordinary general assembly meeting to wind up the firm, subject to approval by a majority of the shareholders, subject to the majority requirement not being lower than the statutory minimum
• A merger
• A court judgement that the company be wound up, for example, pursuant to an application by a shareholder providing serious grounds of justification
• The business being declared bankrupt.

Step 2: Approval of dissolution and liquidator appointment The decision to liquidate the company will require extraordinary general assembly approval. The decision should include:

• What procedures are to be followed during the liquidation process
• Appointment of one or more liquidators
• The remuneration to be paid to the liquidator; otherwise an application may be made to the court to fix the remuneration the liquidator should receive
• Where more than one liquidator is to be appointed, whether the liquidators are responsible for their assignment on a joint and/or several basis.

Step 3: Registration of the decision for dissolution An application should be made to the Ministry of Economy and Commerce for registration of the decision for dissolution in the Commercial Register.

Step 4: Publication of the decision for dissolution The decision for dissolution should be published in two Arabic-language daily newspapers.

Step 5: Declaration by liquidator The liquidator should publish a declaration confirming his appointment, the restrictions on his powers and the process that has been prescribed for the liquidation of the company.

Step 6: Notification The liquidator is required to send a notice of liquidation (by registered mail) to all creditors of the firm about the commencement of liquidation and inviting them to provide details of their claims against the business.

If the creditors or their whereabouts remain unknown, the notice may be made by publication in two Arabic-language daily newspapers. Publication is required to be repeated after one month.

The period of time stipulated in the notice, within which creditors are required to provide details of their claims against the company, may not be shorter than 75 days.

If a creditor fails to provide details of amounts it is claiming against the company by the deadline, the amount owed to that creditor is required to be deposited with the Treasury Department at the court.

Step 7: Preparation of inventory The liquidator must prepare an inventory of the company’s assets and liabilities within three months from the date the liquidator commences the assignment.

Step 8: Liquidator’s powers These include collection and satisfaction of debts, sale of the firm’s assets and property, preservation of the company’s funds and rights, representation of the business before the courts and arbitral tribunals, and settling claims.

Step 9: Order of distribution The distribution of the company’s property is to be applied as follows:

• Satisfaction of outstanding debts, which should occur in the following order:

1) Expenses of liquidation, which includes the fees of the liquidator

2) Remuneration due to employees

3) Amounts due to the state

4) Amounts due to the landlord of the premises leased by the company

5) Other preferential creditors, as prescribed by law.

Distribution among the shareholders according to their rights, interests and obligations to bear losses

Step 10: Time limit If the process of liquidation continues for more than one year, the liquidator is required to prepare a current balance sheet and profit-and-loss statement and report. The liquidator is required to submit these documents to the shareholders or the general assembly for approval. The process of liquidation may not exceed three years, without approval by the court or the Minister of Economy and Commerce.

Step 11: Submission of final statement of account On completion of the liquidation, the liquidator is required to submit (to the shareholders or the general assembly) a final statement of account of the distributions that were made.

Step 12: Approval of final statement of account The final statement of account of the business needs to be approved by the shareholders or the general assembly.

Step 13: Declaration by liquidator The liquidator will now be in a position to publish a declaration to the effect that the liquidation of the company has been concluded.

Step 14: Application for striking off The liquidator makes an application to the Ministry of Economy and Commerce to strike off the company from the Commercial Register.

Step 15: Release of liquidator The liquidator is released from his assignment in the same manner that he was appointed.

The reason for liquidation need not be completion of a project, but may be to reduce costs and liabilities

The decision to liquidate the firm will need to have extraordinary general assembly approval